Table Of ContentMERCH~OTF SD EATH REVISITED:
A , B ,
RMAMENTS ANKERS
F W W
AND THE IRST ORLD AR
THE YEAR 2004 MARKS the seventieth anniversary of the publication of
Engelbrecht and Hanighen's Merchants of Death: A Study of the Inter-
national Armament Industy,l a book that made it into the general
consciousness of most thinking Americans by the mid-twentieth
century. The stark language of the title no doubt contributed to its
fame. Moreover, the theme of arms merchants pushing for war is
both easily understood and easily discussed, even by those who
have not read it.
Engelbrecht and Hanighen presented a convincing historical
argument that armaments manufacturers, working hand-in-hand
with governments, have played a malign role in the modem world,
in particular in the period of World War I. Writing in a popular for-
mat for a broad readership, the authors traced the rising influence of
arms manufacturers and merchants over the last several hundred
years in order to put into context the dreadful conflict of 1914-1918,
which is at the core of the book. The book's thesis resonated well in
1934, the early thirties forming the high-water mark of the interwar
offensive against the "war system" in the United States and against
intervention in foreign wars. Merchants of Death was perhaps the best
known piece of this offensive.2
T. Hunt Tooley is professor of history at Austin College, Sherman, Texas;
author of The Western Front: Battleground and Home Front in the First World
War (Houndmills, Basingstoke: Palgrave Macmillan, 2003); and adjunct fac-
ulty member of the Ludwig von Mises Institute.
~H.c. Engelbrecht and F.C. Hanighen, Merchants of Death: A Study of the
International Armament Industry (New York: Dodd, Mead, 1934).
20ther works in this tradition include Justus Doenecke, Storm on the Hori-
zon: The Challenge to American Internention, 1939-1941 (Lanham, Md.: Row-
man and Littlefield, 2000); Wayne S. Cole, Roosevelt and the Isolationists,
1934-1945 (Lincoln:U niversity of Nebraska Press, 1983); and Wayne S. Cole,
Senator Gerald P. Nye and American Foreign Relations (Minneapolis: University
of Minnesota Press, 1962).
Engelbrecht and Hanighen's story connected the rise of com-
plex, long-range armaments with the rise of the modern state.3 Yet it
is also a story of particular individuals and companies who dealt
with and against each other. Many of the arms merchants had laid
the basis for their twentieth-century wealth in the nineteenth cen-
tury and even earlier. The Du Pont family arms business stemmed
from a powder factory opened in 1802. The Krupps had a small steel
business until the middle of the century. Thomas Vickers served an
apprenticeship in the Krupp company and subsequently followed
the Kmpps in producing first peacetime products, and then, from
the 1860s, armaments. The Vickers firm was as colorful and as sinis-
ter, perhaps, as any of the arms producers, at least after joining
forces with Sir Basil Zaharoff, the mysterious Greek arms merchant
whose connections extended across the globe.4
One key to the success of all the arms merchants was that they
held few national prejudices when it came to selling munitions and
arms. So, for example, Irenee Du Pont in some cases supplied both
sides with munitions in the Latin American wars for liberation after
the Napoleonic period.5 The Krupp family followed a similar pat-
tern, as did Schneider-Creusot in France. The Vickers Company, the
most politically powerful arms company in Britain, under Sir Basil
Zaharoff's leadership supplied weapons to both sides in the Boer
War, despite the company's position as a kind of national treasure.
Despite this tendency to supply all comers, the great arms com-
panies all managed to secure a role as staunch patriots who enjoyed
a special place in the "national" economy. Alfred Kmpp had
expanded the family steel business to arms production by the 1840s,
and was selling cannon abroad. When the Prussian army underwent
reorganization in the late 1850s and early 1860s, it adopted the new
Krupp artillery. The company ballooned, through the Wars of Unifi-
cation, from a small plant at Essen covering two-and-a-half acres
and employing a few dozen workers to a complex of 250 acres which
employed 80,000 workers in 1914. The Krupp concern indeed, while
continuing to sell weapons abroad, became a kind of unofficial part
of Imperial Germany's government, protected from both economic
3~ number of modem scholars have explored this association, especially
William H. McNeill, The Pursuit of Power: Technology, Armed Force, and Soci-
ety Since A.D. 1000 (Chicago: University of Chicago Press, 1984); and Martin
van Creveld, The Rise and Decline of the State (Cambridge: Cambridge Uni-
versity Press, 1999).
4~ngelbrechat nd Hanighen, Merchants of Death, pp. 108-10. On Zaharoff,
see Robert Neumann, Zaharoff the Armaments King (London: George Allen &
Unwin, 1938).
5~n~elbrecahntd Hanighen, Merchants of Death, pp. 24-26.
competition and the scandals produced by some of the company's
leaders.6 Most of the other great arms companies behaved in the
same way.
As they did so, arms merchants almost always used the nature
of their trade to achieve monopolistic relationships with govern-
ments and a free hand at fixing prices and delimiting markets
throughout their industry. By 1905, Du Pont provided all the pow-
der ordered by the United States government, and the company was
able on its own to "fix" prices across the board. The government
charged Du Pont with violating antitrust laws in 1907, calling for
price-fixing and related practices to stop, but by this time, Du Pont
had eliminated most American competitors with the assistance of
the government. The company supplied an enormous share of the
gunpowder used by the Allied forces in World War 1.7
Similarly, the Schneider family of the French company Schnei-
der-Creusot came out of the French defeat at Prussia's hands in 1871
with huge profits. Having supported Napoleon 111, the company
was now equally supportive of the various Third Republic govern-
ments, especially those of a nationalist coloring. Meanwhile, the
company relied on the state to suppress strikes and manage discon-
tent at its factories, as it supplied the army with weapons. The
Schneiders eventually managed to place one of their own, Eughne
Schneider, in the Chamber of Deputies, where he served throughout
a period crucial to arms makers: 1900 to 1925.8 Hence, a pattern is
clear: increasingly close association with the state, especially from
the period of intense nationalism following the 1860s, and a ten-
dency toward gaining access to public support for private profits.
Already high before World War I, profits soared during it. Before
the third year of World War I, Krupp had more than doubled its
huge profits of the immediate prewar period-to the level of 66 mil-
lion marks annually. In Austria-Hungary, Skoda likewise doubled its
profits during the early war years. On the other side of the Atlantic,
profits surged still higher. U.S. Steel netted $105 million annually
before the war, $239,653,000 during it. Du Pont's numbers in the
same two categories were $6,092,000 annually before the war, to a
staggering yearly average of $58,076,000 during the war. These
results were repeated in dozens of smaller and subsidiary arms com-
panies throughout the belligerent countries.9 Such are the episodes
which Engelbrecht and Hanighen trace.
%id., pp. 71-84. On the Krupp empire, see also William Manchester, The
Arms of Krupp (Boston: Little, Brown, 1964).
7~ngelbrechatn d Hanighen, Merchants of Death, pp. 22-37.
gIbid., pp. 121-25.
9Ibid., pp. 159-79.
The revisionist historian Harry Elmer Barnes wrote the book's
Foreword, praising it as an expos6 of the armaments industry and
the willingness of the American government to be persuaded and
manipulated by it. But he does make a proviso about the topic which
is fairly dramatic, coming as it does in a part of the book itself:
Even though the armament makers have played a prominent part
in encouraging wars, rebellions and border raids, they never
exerted so terrible an influence upon the promotion of warfare as
did our American bankers between 1914 and 1917. Through their
"
pressure to put the United States into the War, these bankers
brought about results which have well nigh wrecked the contem-
porary world.10
As a matter of fact, J.P. Morgan & Co. and other American bank-
ing institutions come into Engelbrecht and Hanighen's story in ways
consistent with the behavior mentioned by Barnes, but they do not
play the central role, at least not in their capacity as banks per se. The
focus of the book is arms and munitions manufacturers like Du Pont,
but the authors are clear on the role of the banks:
All arms makers have important financial connections. In the Mor-
gan group will be found the Du Pont Company, the Bethlehem
Steel Corporation, the U.S. Steel Corporation, together with cop-
per, oil, electric appliances, locomotive, telephone and telegraph
interests. This tie-up also leads over into the great banks, including
the National City, Corn Exchange, Chase National, etc. It is the
Morgan group of corporation clients and banks which dominates
the American arms industry.ll
Engelbrecht and Hanighen point out that internationalization of
boards and companies allowed banks and arms companies to have
a purchase on any situation, no matter what ties of "loyalty" might
be invoked. At the same time, their more-or-less constant relation-
ship with any foreign government to which they sold arms allowed
them easy access to the local press. Influencing the populace, and
hence public policy, through propaganda became commonplace.
When a war scare was needed, it was quite possible to create one by
maximizing reports of existing tensions in the press.12
In evaluating Merchants of Death, it is important to emphasize
that the topic of the bankers' influence on American intervention
into the First World War was very much a public issue in 1934. For
one thing, the extensive investigations of the Senate Munitions
lo~bid.p, . viii.
lll'bid., p. 141.
%id., pp. 14143.
Inquiry (the Nye Committee)-a congressional investigation of the
role of arms manufacturers in the war--completed in early 1936 an
expos6 of bribery and corruption among American arms manufac-
turers such as Du Pont, Whitney Aircraft Company, Sperry Gyro-
scope, and others. Most of these companies had indeed provided
arms to a wide range of customers, sometimes on both sides in the
same war.13
From another direction, it was also in the early and mid-1930s
that dissident Marine General Smedley Butler began criticizing the
interventionist activities of international bankers, drawing on his
personal experience at the sharp end of empire and war. His book on
the topic appeared at the same moment as did Merchants of Death.
His central point is summed up in a famous passage from his
speeches and publications:
War is just a racket. A racket is best described, I believe, as some-
thing that is not what it seems to the majority of people. Only a
small inside group knows what it is about. It is conducted for the
benefit of the very few at the expense of the masses.14
Indeed, the whole array of financial arrangements of the inter-
war period, from the Paris Peace and reparations to the Young Plan
to the trade wars of the 1930s revolved around the names of Morgan,
the Rockefeller interests, Kuhn, Loeb & Co., and related banking and
commercial concerns. Apart from Hitler and Hindenburg, perhaps
no German individual was better known in the United States than
Hjalmar Horace Greeley Schacht, the banker and wizard of the Ger-
man economy from World War I to the late thirties.15
Certainly, the study of both groups-arms makers and
bankers-finds not only similar behaviors but often the same indi-
viduals. Broadly speaking (and this goes for arms makers and
bankers throughout the European world), both groups constituted
international operations that justified influence over their own gov-
ernments by their supposed patriotism. Yet both used their own
governments to subsidize their operations and produce enormous
profit. Both arms makers and bankers were active in handing out
13~ohnE . Wiltz, In Search of Peace: The Senate Munitions Inquiry, 1934-1936
(Baton Rouge: Louisiana State University Press, 1965). The report of the Nye
Committee, often called the Nye Report, is in U.S. Senate, Special Commit-
tee Investigating the Munitions Industry, 73rd Cong., 2nd sess., 1936.
14Smedley D. Butler, War is a Racket (New York: Round Table Press, 1935).
15Schacht's 1953 memoirs appeared in translation in the United States with
the title Confessions of the Old Wizard: The Autobiography of Hjalmar Horace
Greeley Schacht (New York: Houghton Mifflin, 1956).
subventions to the press in order to shape public opinion in needed
ways. Perhaps most importantly, the interests of both groups lay in
a cycle of conflict. The arms makers needed conflict for huge
demand and close relations with the governments being supplied.
But they also needed bouts of armed peace or cold war to upgrade
technologies and sell their new goods. The bankers likewise needed
conflict as a way of financing governments' war efforts overall, forg-
ing all kinds of ties with those governments, and gaining govern-
ment help in crushing their business rivals or taking them over. Yet
times of peace were especially important for bankers, because even
greater profits were forthcoming from reconstruction efforts after a
conflict was over, counted then not by millions but by billions.
The nature of armaments technology before and during the First
World War made the terms of the "destruction-reconstruction" nexus
far more extreme. Advances in artillery, above all, made shellfire more
powerful, more accurate, and more destructive of lives and property.
Artillery stood at the center of war tactics in 1914, and became even
more predominant as the war progressed. The result was maximum
destruction. For interests which combined arms production with
investment banking, maximum destruction meant maximum oppor-
tunity for profits from reconstruction after the war.16
A few figures will give an idea of the scope of destruction. At the
Armistice, the Entente powers on the Western Front and the Italian
Front had in their lines 29,315 artillery pieces.17 Shelling was more-
or-less constant along all fronts, especially the Western Front. It
intensified with attacks, and the pre-attack explosives expended in
shells or mines tended to increase as the war went along. Artillery
shells came in many varieties, and by the end of the war, they were
raining high explosive, shrapnel, burning heavy metals, gas, and
other death-dealing substances down on enemy positions. The zone
of destruction on the Western Front alone was roughly 400 miles
long by 50 miles wide. Of these roughly 20,000 square miles, some
substantial segments remain today so thoroughly impregnated with
chemicals, live explosives, and other detritus of war that they are
still "red-zoned" by the French government-that is, habitation is
simply forbidden, and no economic activity is allowed, except log-
ging in some cases. Some villages are today remembered only by
reunion associations, since the families have been scattered to live
elsewhere since 1914.18
l6~ooleyT,h e Western Front, pp. 88-93.
17~andaGl ray and Christopher Argyle, Chronicle of the First World War
(New York: Facts On File, 1991), vol. 2, p. 288.
l8~oar general description of the zone itself, see Tooley, The Western Front,
pp. 258-63.
The destruction was enormous, and the inefficiencies of "recon-
struction" combined government bureaucratic highhandedness
with the "reconstruction" elements of "reparation" deals which con-
tinued for over a decade after the war. Indeed, the little-investigated
story of the actual reconstruction of France, Belgium, and the other
reparation recipients is beyond the scope of this study, but it is a
story that contains elements one might expect from nearly a century
of experience with such processes: politicization of "reconstruction,"
monopolistic relationships between governments and companies
chosen to do the reconstructing, and various other financial tech-
niques associated with government programs.19
Engelbrecht and Hanighen worked against this background,
and also from the perspective of the populist historical revisionism
which formed an important component of the intellectual move-
ment against aggressive war. During the vibrant discussions of
American intervention in the war, imperialism, and militarism dur-
ing the 1930s and afterward, most of the "mainstream" historians in
American academe were missing in action. Indeed, under the
renewed waves of war and destruction which began only five years
after the publication of Merchants of Death, all but the staunchest
American critics of the warfare state were overwhelmed. The name
of the book lived on, it is true, but in caricature form, so that by the
1960s and 1970s, college professors could assert, without having
read it, that the Merchants of Death "theory" was that World War I
had come about solely because of the makers of munitions and
armaments-a simplification which the authors explicitly rejected.20
Since the Second World War, scholarly historical literature on
armaments and the origins of World War I have tended to cast the
issue in terms of an armaments competition among the Great Pow-
ers of Europe. Historians have argued over whether naval arma-
ments were more significant in this regard, or whether land-based
weaponry played the major role in the ~om~etition.2S1ti ll, the
assumption at the heart of any such interpretation is that the arms
19The best study of reconstruction is the recent work by Hugh D. Clout,
After the Ruins: Restoring the Countryside of Northern France After the Great War
(Exeter, U.K.: University of Exeter Press, 1996).
20~ngelbrechatn d Hanighen, Merchants of Death, pp. 5-11.
21~enxt ensive argument for the importance of naval armaments in the com-
ing of the war is Paul Kennedy, The Rise of the Anglo-German Antagonism
(New York: Allen & Unwin, 1980). Two recent works speak convincingly for
the primacy of land-based weapons in the arms competition: David G. Herr-
mann, The Arming of Europe and the Making of the First World War (Princeton,
N.J.: Princeton University Press, 1996); and David Stevenson, Armaments and
the Coming of the War: Europe, 1904-1914 (New York: Clarendon Press, 1996).
"race" which preceded World War I was in a sense automatic: Euro-
pean states built more arms when they observed other states build-
ing more arms. Engelbrecht and Hanighen examine more convinc-
ing historical instrumentalities in that they provide at least a history
which is full of contingencies and individual motivations, rather
than a history which seems predetermined. Yet, by and large, his-
torical scholarship has paid little lasting attention to the idea that
armaments makers encouraged states to go to war.
Likewise, in terms of the bankers and their role in armaments
and the making of war, the great crusade of the Second World War
wiped out much of the existing interest in this topic as well as many
others. The earlier critique was largely forgotten in the heady war
for freedom against the Axis Powers. Perhaps, in addition, the finan-
cial elites themselves did more in the way of publicity to make them
seem a necessary and important part of the American struggle for
"freedom" here and abroad.
The general subject of the influence of international banking and
business has been at the core of some prominent dissenting inter-
pretations of the modern world, including interpretations from
widely separated points on any given political spectrum. Large bod-
ies of popular literature on the malign influence of the bankers and
big business exist and have existed since at least the late nineteenth
century. A thorough and satisfying scholarly treatment of this his-
torical subject has yet to be written, but many parts of this story have
been investigated, both from within academia and outside it. The
following sections of this essay constitute an attempt, first, to assess
Engelbrechtfs and Hanighen's insights into the broad topic of
bankers and big business in World War I in light of the serious liter-
ature which has emerged in the seventy years since its publication.
From the components of this historiography, we will explore as well
the outlines of a broad reconstruction of the relationships involved.
OTHER SCHOLARS CONSIDER THE ISSUE
From the scholarly world, a mainstream historical literature on the
enormous influence of big business and banking on United States
intervention in the First World War began to emerge only in the
1960s, and it was fairly limited even then.22
221 am using the terms "mainstream" and "scholarly" in this article to indi-
cate the academic world of university-trained historians (and economists
and political scientists, etc.). It is worth noting that the graduate education
of a large percentage of academics writing the history discussed herein have
been supported by foundations related to many of the companies men-
tioned in this article. For example, the present writer was a Du Pont Fellow
at the University of Virginia during one stage of his doctoral work.
Gabriel Kolko and the New Left
New Left revisionism, especially the work of Gabriel Kolko,
made it into the mainstream of the historical and political con-
sciousness at this time, but the Marxist biases of many New Left
revisionists rendered their work off-putting to many scholars who
might have been interested in broadening the discussion and taking
up the topic of international banking and its relationship to World
War 1.23 As the New Left critique of American interventionism, or
parts of it, entered the mainstream of the American historical pro-
fession in the 1970s and 1980s, the whole topic of the banks tended
to drop out of the argument.
Some interest in the influence of bankers on the First World War
has reemerged with younger scholars in the 1990s, but hardly any
note of disapproval remains in these works, in which monopolistic
business and international bankers in particular are seen to be pow-
erful, but well-intentioned and altr~istic.~~
Georges-Henri Soutou
Recent works on the economic diplomacy of the First World War
have been few, but Georges-Henri Soutou's magisterial monograph
on the economic war aims of all the belligerents should be men-
tioned here. Soutou's work is not especially critical of the role of
23~olkhoa s dealt with this theme repeatedly, but his classic statement of the
problem is Gabriel Kolko, The Triumph of Conservatism: A Re-Interpretation of
American History, 1900-1916 (Chicago: Quadrangle Books, 1963). Some stu-
dents of New Left revisionists such as Kolko, William Appleman Williams,
and Lloyd Gardner continued to work on these topics for some time. See, for
example, Harry N. Scheiber, "World War I as Entrepreneurial Opportunity:
Willard Straight and the American International Corporation," Political Sci-
ence Quarterly 84 (September 1969): 486-511; Gail L. Owen, "Dollar Diplo-
macy in Default: The Economics of Russian-American Relations,
1910-1917," Historical Journal 13, no. 2 (1970): 251-72; and Roberta A. Dayer,
"Strange Bedfellows: J.P. Morgan & Co., Whitehall, and the Wilson Admin-
istration During World War I," Business History 18 (1976): 127-51.
24!%e, for example, Priscilla Roberts, "Willard D. Straight and the Diplo-
macy of International Finance during the First World War," Business History
40 (1998): 16- 47; Martin Horn, Britain, France, and the Financing of the First
World War (Montreal: McGill-Queen's University Press, 2002); Martin Horn,
"A Private Bank at War: J.P. Morgan & Co. and France, 1914-1918," Business
History Review 74 (Spring 2000): 85-112; and Jeffrey Frieden, "The Econom-
ics of Intervention: American Overseas Investments and Relations with
Underdeveloped Areas, 1890-1950," Comparative Studies in Society and His-
tory 31 (January 1989): 55-80.
business on national policy in one way or the other, but his study-
based chiefly on archival materials-is massive, and his conclusions
are in many ways consistent with the thesis of Merchants of Death.
Soutou's analysis of American bankers and American policy is
particularly useful here. He attributes a great deal of direct influence
by investment bankers and business on the decisions of Wilson and
his administration. In Soutou's interpretation, almost all the Ameri-
can political and financial elites viewed the war as an opportunity
for the expansion of American capital and American influence.
The pre-intervention phase of the war represents for Soutou a
period in which Wilson tended to be swayed by "hemispheric"
arguments that the United States should continue and indeed
expand its political and economic power in Latin America, argu-
ments which came to Wilson most significantly through William
Gibbs McAdoo, a former corporate lawyer who was Wilson's Secre-
tary of the Treasury and son-in-law. McAdoo was associated with a
specific group of banks and corporations who stood to gain if their
activities in Latin America received even more subsidizing from the
American public.
Yet after late 1916, Soutou argues, Wilson became convinced by
the arguments for an "Atlantic" (Anglo-American) outlook repre-
sented by Secretary of State Robert Lansing, the Federal Reserve
Board, and the Morgan group. In the end, according to Soutou,
American entry into the war was not solely due to economic causes,
although many influences from circles of high finance influenced
policy. On the other hand, he says, American entry had very direct
and massive economic consequences, and it signaled an expansion
of American economic goals from the old hemispheric plans to the
world scale.25
Carroll Quigley
On the other hand, Carroll Quigley, a longtime professor of his-
tory at Georgetown University and establishment historian contem-
porary with the New Left revisionists-but very far from any revi-
sionist camp-attributed a great influence to Anglo-American
banking concerns. One of Quigley's research specialties was the his-
tory of banking and finance in the nineteenth and twentieth cen-
turies, and this research is reflected in his books Tragedy and Hope
(1966) and The Anglo-American Establishment (written in 1949). In
these works, Quigley described explicitly a kind of secret, benevo-
lent "network consisting of international bankers and connected
25~eor~es-~eSnourito u, L'or et le sang: les buts de guerre kconomiques de la
premi2re guerre mondiale (Paris: Fayard, 1989), pp. 35-11.
